Competition forces food prices down

THE COST of food in shops is continuing to fall as discount stores selling a limited range of cheap groceries reduce prices further and expand their share of the British grocery market, writes Simon Midgley.

In January, the shopping bill for a standard 40-item basket of groceries ranged from pounds 28.86 in Netto, a discount outlet, to pounds 45.62 in Waitrose, pounds 35.30 in Sainsbury and pounds 33.94 in Safeway, according to the latest quarterly food survey by Verdict, a leading firm of retail market research consultants. The cost comparison is between the cheapest food items available in the competing stores. Thus, budget brands in Netto are compared with quality own brands in Waitrose.

'The flourishing discount market has acted as a catalyst for the rest of the market by reducing the price of everyday basic groceries,' the report says. The grocery trade is now polarising between the nation's 860 superstores, which account for 60 per cent of total retail sales, and the 1,500 discounters, which now enjoy 9.8 per cent of all sales. This compares with 8.8 per cent a year ago.

Meanwhile, medium-to-small size supermarkets are being squeezed because they are unable to offer the range of food available in superstores nor the discount stores' low prices. The survey found that, in the past year, the price of an average basket of discount store groceries had fallen from pounds 33.81 to pounds 30.87. The average prices of the four leading grocery chains, somewhat higher than the discounters, have fallen by around 8.3 per cent in response to competition.

Verdict predicts food discounting will account for 14.2 per cent of the total grocery market by 1997.

----------------------------------------------------------------- Table: FOOD PRICING SURVEY: BASKET PRICE 1994 ----------------------------------------------------------------- Jan 94 pounds Netto 28.86 Shoprite 29.12 Kwik Save 29.38 Dales 29.65 Food Giant 29.81 Ed 29.85 Lo-Cost 30.38 Aldi 30.44 Solo 11 30.56 Asda 31.19 Discount Giant 31.54 Morrisons 31.60 Penny Market 31.90 Tesco 32.43 Gateway 32.73 Solo 1 33.09 First Discount 33.77 Pioneer 33.89 Safeway 33.94 Sainsbury 35.30 Waitrose 45.62 ----------------------------------------------------------------- Source: Verdict Research -----------------------------------------------------------------